is wholesaling real estate legal in alabama

Is Wholesaling Real Estate Legal In Alabama? A 2024 Guide For Investors

co-wholesaling legal reverse wholesaling wholesale real estate wholesaling real estate May 03, 2024

Join us on a comprehensive exploration of real estate wholesaling in Alabama, a field as abundant with opportunities as any other. Despite its potential, many aspiring investors ask one question: Is wholesaling real estate legal in Alabama?

This article addresses this critical question while providing valuable insights into regulatory nuances, strategic approaches, and essential tips for success in the Alabama housing market. Navigate through the jump links below to access a wealth of knowledge tailored to empower real estate professionals:

Located deep in the heart of Dixie, Alabama is a thriving epicenter for all manners of commerce.

Locals enjoy warm weather and a relaxing prototypical lifestyle that attracts many people to the "Bama way of life."

That creates a healthy demand for real estate. While many people work in this field following a traditional path as a broker or agent, several others want to know about breaking in as a wholesaler.

The prospect of a flexible and potentially lucrative career as a wholesaler starts with a single question: Is wholesaling real estate legal in Alabama? Let's find out together as we examine today's Alabama real estate laws.

*Before we begin our guide on whether wholesaling real estate in Alabama is legal, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

What Do You Need To Know About Wholesaling Houses in Alabama?

To succeed in wholesaling houses in Alabama, it's essential to understand local real estate laws to ensure compliance and legality. Different exit strategies, such as contract assignments or double closings, can greatly influence your business model and effectiveness. Additionally, grasping market dynamics, including buyer demand and pricing trends, is crucial. With the question "Is wholesaling real estate legal in Alabama?" in mind, yes, it is legal, provided you adhere to these regulations and strategies. This knowledge is vital for any investor looking to thrive in Alabama’s real estate market.

First, there are three primary ways to wholesale a property.

You can find a piece of real estate with a motivated seller (whether you already know how to buy foreclosed homes in Alabama or scour the MLS), and after you finalize a purchase and sale agreement with that person, you can enter into an assignment of contract with a third party. Being under contract to purchase property gives you the right to market the real estate contract itself (not the property); that's an important distinction to make when pondering the question, "Is wholesaling real estate legal in Alabama?" It is essential to note investors can’t market the property itself. Many newbies to wholesaling make this mistake, and unfortunately, they end up in some legal trouble. Only licensed Realtors have the right to market the property.

Two other wholesaling strategies are the double close and the buy-and-sell method. They are similar because both involve two separate transactions.

In both, the wholesaler buys the property from the seller. Then, the property is sold to a third party within a day or two in a double closing or several days and weeks later with a buy-and-sell agreement.

Unlike assigning a contract, these two methods require adequate funding because the wholesaler participates in the transaction. As their names suggest, the wholesaler performs two transactions, each with closing processes, fees, and funds.

Unlike the assignment of a contract method, the wholesaler does not need to reveal the profit they will make from the two separate transactions.

You don’t need a real estate license for all these methods, though some people go through the extra effort and expense.

Also, transparency is crucial. Wholesalers must inform property owners about their intentions, just as they must provide buyers with disclosures about the property.

Read Also: The Pros & Cons Of Wholesaling Real Estate: An Investor's Guide

Yes, wholesaling real estate is legal in Alabama, as long as you follow all state rules and regulations governing real estate transactions. In particular, investors can't do anything that requires a real estate license if they don't already have one. As a result, unlicensed wholesalers can't help homeowners buy, sell, or market their properties. Instead, they can only acquire the rights to buy the house and sell their rights to end buyers for a fee.

Let's first examine "Is wholesaling real estate legal in Alabama?" by looking at the organizations that make the laws. For example, the Alabama Real Estate Commission (AREC) oversees state laws, including licensing requirements for Realtors and Brokers.

The Commission aims to protect the public interest in all real estate transactions. It is also an excellent source of information for all members of the Alabama real estate profession.

As a wholesaler, although you are not required to be licensed, you must remain compliant with all real estate laws and procedures.

To learn more about Alabama real estate laws, you can access the AREC and find consumer information on the following topics:

  • Agency/Brokerage Services
  • Real Estate License Status In Alabama & Other Jurisdictions
  • Home Inspections
  • Environmental Issues
  • Community Resources
  • Stopping Mortgage Fraud
  • Landlord-Tenant Act
  • Complaints (against brokers or salespersons)

Another excellent source of information is the Alabama Association of Realtors (AAR), which, among other resources, explicitly addresses Alabama Contract Law in two parts:

  • Part I focuses on offers
  • Part II focuses on other essential concepts in contract law

wholesale real estate contract pdf

Do You Need A Real Estate License To Wholesale Real Estate In Alabama?

Wholesaling without a license is legal in Alabama. However, you must understand there are certain limitations an unlicensed wholesaler faces.

The most important of these is that you can’t market an actual property for sale without a license. As a wholesaler, when you place a property under contract with a seller, you can only market the rights to assign the contract to a buyer. There is a big difference between the two activities.

Also, as a wholesaler, you collect a fee when you assign a contract agreement you have in place with a seller. As a licensed real estate professional, you will earn a commission when you sell the property.

Alabama Code Section 34-27-30

According to Alabama Code Title 34 (Professions and Businesses § 34-27-30), a license is required for the following real estate-related activities in Alabama:

  1. "Sell, exchange, purchase, rent, or lease real estate situated within the State of Alabama.
  2. Offer to sell, exchange, purchase, rent, or lease real estate situated within the State of Alabama.
  3. Negotiate or attempt to negotiate the listing, sale, exchange, purchase, rental, or leasing of real estate situated within the State of Alabama.
  4. List or offer or attempt or agree to list real estate for sale, rental, lease, exchange, or trade situated within the State of Alabama.
  5. Auction, offer or attempt or agree to auction, real estate situated within the State of Alabama.
  6. Buy or sell or offer to buy or sell, or otherwise deal in options on real estate situated within the State of Alabama.
  7. Aid, attempt, or offer to aid in locating or obtaining for purchase, rent, or lease any real estate situated within the State of Alabama.
  8. Procure or assist in procuring of prospects for the purpose of effecting the sale, exchange, lease, or rental of real estate situated within the State of Alabama.
  9. Procure or assist in the procuring of properties for the purpose of effecting the sale, exchange, lease or rental of real estate situated within the State of Alabama.
  10. Present himself or be presented as being able to perform an act for which a license is required."

It’s important to note that wholesaling is not on this list. You should be in good shape as long as you market the contract and not the property.

To protect against conflicts or violating state laws, some wholesalers get a real estate license or become real estate brokers.

Read Also: How To Wholesale Real Estate In Alabama: Step-By-Step

What Are The Wholesaling Laws In Alabama?

Wholesaling real estate in Alabama

Specific laws regarding real estate deals are found in Title 34 of the State Code of Alabama. Title 34 is divided into several articles and further into specific codes.

For example, Article 1 details General Provisions. Those General Provisions are divided into the following Codes:

The remaining Articles are focused on the following areas:

  • Article 2: Licenses
  • Article 3: Vacation Time-Sharing Plans
  • Article 4: Real Estate Consumer's Agency and Disclosure Act
  • Article 5: Interference with A Real Estate Brokerage Relationship
  • Article 34 (Chapter 27): Licensing Provisions

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

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Is Co-Wholesaling Real Estate Legal in Alabama?

Co-wholesaling real estate is legal in Alabama, allowing investors to collaborate by sharing responsibilities and resources. This legality stems from Alabama's real estate regulations that permit contract assignments and partnerships, provided all activities comply with state laws, making it a viable strategy for expanding your real estate business.

Co-wholesaling is the act of partnering with another like-minded individual to wholesale properties in Alabama; this is a viable option for many people, especially those who want more resources to complete wholesaling deals.

Often, a joint venture between co-wholesalers divides tasks and responsibilities that play to each partner’s strengths. This often means one person does the legwork of searching for properties to place under contract while the other partner provides cash buyers.

Co-wholesalers may also combine resources to bring the contract, legal, or other real estate investing expertise to the table.

It’s important to maintain an open and transparent relationship with the seller and identify all parties in the transaction.

While a co-wholesaler could pull out, change deal terms, or engage in other questionable activities, this is rarely true. However, you must be aware of these potential challenges to help you identify and choose trusted partners. To protect yourself, it’s smart to execute a co-wholesaling agreement or joint venture agreement to protect your legal interests.

Besides these parameters, all laws and statutes governing co-wholesaling are the same as wholesaling.

Is Reverse Wholesaling Real Estate Legal In Alabama?

Reverse wholesaling real estate is legal in Alabama as it adheres to standard wholesaling laws but with a strategic twist: investors first secure buyers before finding suitable properties. This approach is compliant with Alabama's real estate regulations, ensuring legality as long as all transactions follow state guidelines.

Reverse wholesaling is simply juggling the order in which you structure a wholesaling deal. It means you first line up real estate investors (often from a prequalified buyers list) and then find appropriate real estate properties that fit their investment objectives.

Many wholesalers like this approach because it creates a more reliable exit strategy, builds closer bonds with cash buyers based on the types of investment properties they want, and aligns wholesalers with private and hard money lenders.

All the other steps are the same, so Alabama does not place separate restrictions on reverse wholesaling in the state.

How Can I Legally Wholesale Real Estate In Alabama?

Is wholesaling real estate legal in Alabama? Not only is it legal, but it's also relatively simple. Suppose investors can learn the processes, strategies, and real estate laws and regulations, avoid breaking the law, and practice transparency. In that case, they will be well on their way to wholesaling real estate in Alabama.

Seek an experienced real estate attorney, ask questions, and get help when unsure whether you’re on the right side of the law.

The fundamental key is being well-versed in the most common methods of wholesaling.

With an assignment of a contract, the wholesaler is a middleman who finds a seller and places their home under contract with the right to buy the property; this gives the wholesaler the right to assign the contract, collecting an assignment fee for their efforts.

Under a double close, a wholesaler buys a property, immediately executes a purchase contract, and sells the property (often on the same day) to a cash buyer.

In a buying and selling scenario, a wholesaler buys a property and then sells it weeks or months later to someone who knows how to flip houses in Alabama—who will likely make strategic improvements and flip the property to a final buyer at an appropriate time.

Many people find a lower barrier to entry into wholesaling by assigning a contract because this method requires no money to complete a deal. The wholesaler is strictly a middleman. When assigning a contract, the drawback is that you must disclose the fee amount you’ll receive.

With a double-close or buy-and-sell deal, you execute two separate transactions in each case. While these methods require financial resources to facilitate financing, the flip side is that with this wholesale deal, a wholesaler does not need to reveal how much profit they will make when selling the property.

Final Thoughts

Is wholesaling real estate legal in Alabama? Simply put, real estate wholesaling remains legal in Alabama, provided wholesalers strictly adhere to all relevant state regulations. In particular, wholesalers must understand that they are not acquiring or marketing the property itself; instead, their business revolves around transferring the contract to purchase the property. This distinction is crucial for operating within the legal boundaries set by Alabama law, ensuring that wholesalers can conduct their businesses without legal repercussions.

Now that you know wholesaling real estate is legal in Alabama, take the next step towards launching your venture by checking out Real Estate Skills' free training. This resource is designed to help you get started and navigate the complexities of real estate wholesaling effectively.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.

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